Sidecut Reports

With just nine days left in its all-important fourth quarter, Clearwire is offering a $50 gift card to subscribers who sign up before Dec. 31. Why is the $50 significant? It might signal a change in strategy from Clearwire, which up until this point has been pretty adamant about not offering device subsidies to subscribers.

While the gift card isn’t a subsidy per se, it does about the same thing since the Clear USB modem is currently priced at $49.99 plus tax. So, like we had suggested earlier, maybe Clearwire is seeing some resistance from folks who don’t want to pony up the full price for a device that they are unsure about. A $50 gift card is essentially a free WiMAX-only modem, so that takes some of the sting out of signing up.

Will the promotion help Clearwire in its goal to sign up 81,000 users this quarter? It can’t hurt — but it may be a sign that the company is feeling some heat and needs to close strong. We’ll know how it turns out in February, when Clearwire reports its Q4 numbers.

If you’re a regular reader of this blog, than our friend Andy Abramson is likely familiar to you. He was generous enough to allow us to re-post his excellent deconstruction of AT&T’s recent attempts to put spin control on its mobile network woes. Take it away, Andy:

AT&T Mobile/Wireless - In Spin Control Mode

Let’s face it, AT&T made an error two years ago and miscalculated what the iPhone would mean. I don’t mean that people inside AT&T didn’t know what would happen. They did. Executives inside the mobile division expressed that it would take at least seven billion dollars to double the capacity of their aging mobile network. Now, AT&T has begun the spin control because their network is not keeping up with demand. This has zero to do with technology. It has to do with greed.

When the original AT&T sold its mobile network to Cingular, those AT&T cities/markets were already well on their way to 3G and in a dead heat vs. Verizon and Sprint for a real next-generation network. It was the rest of Cingular that wasn’t. Who owned Cingular? BellSouth and Southwestern Bell, two RBOCs that were run like old line telcos, with the occasional flash of “we’re gearing up for the next …..” type of statements.

Both covered large parts of the USA, but other than a few sacred cows, like Houston, Dallas, Miami and Atlanta, for the most part, the territory they covered could care less about the wireless data boom that was coming. Or so they thought. Their mockery of recognizing the digital divide is outrageous. Instead of saying, let’s do what’s best, and take the short term hit, by building out a real 3G network, with enough capacity to handle growth everywhere, they chose instead to pick pockets of market areas, and even there, they missed.

The revelation about San Francisco [being poorly covered] is only shocking if you never tried to get anything done in that city. Government moves like molasses. Planning takes years. AT&T could have leveraged the idea of Wi-Fi very quickly in SF, but instead was more concerned about selling old style 1.0 era DSL.

Instead if installing fiber as Verizon is doing across their footprint, AT&T developed the next generation of long range DSL, named it uVerse and are trying to fight the cable companies on one front, while doing their best to battle Verizon Wireless on another. How could the AT&T veterans from PacBell not know how long it would take to wade through all the red tape to get better locations for bigger and faster cell sites? How could the AT&T engineers not realize that backhaul was going to be an issue, when companies like Firetide have been screaming that story at them and the rest of the tech world for a few years now? How can they as a company, who buys from Cisco and other giants in the technology plumbing business, not understand that they were going to have a capacity issue? They did and they went into self denial mode.

These spin control statements at investor conferences are designed to shore up the confidence of the investors, and the analysts. But when you read between the lines you can clearly see that they royally screwed up. Misjudged the market by a country mile and are now asking their customers to pay for their mistakes.

What I don’t understand is this though: Why can other nations’ operators who are all offered the same equipment, software, hardware, infrastructure components, and so forth, all build a working network without the hassles and AT&T can’t in the same number of years? To me, the answer is simple. As AT&T has rolled itself back into what it was before, one giant phone company, the vision of break up, divestiture and the future was erased. Instead of rabid competition, we have a limited choice of options. It’s time for the FCC to step in and become the playing field leveler. Take some things away from AT&T, create a hotbed of competition, and open up the airwaves. Start by trimming their lobbying efforts. Then, hold them accountable for their intentional misdeeds. Lastly, give more power to those rising, by fostering a climate of change.

By the way. The same decision makers calling the big shots for wireless, are those same folks who stopped bringing you CallVantage… maybe not in name, but in culture, inside the company upbringing and philosophy.

While we are always amused when big corporations take public whacks at each other, we wonder if Verizon might not find itself with an iPhone-like network capacity problem when it comes time to move to 4G. Though Verizon’s pretty cocky about how well its network works now, sounds of spectrum-crisis alarms are starting to be heard around the telecomosphere, with much smarter minds than ours saying it’s already past time to find more wireless spectrum for our near-term future.

By great chance, a breakfast meeting this past spring here in Silicon Valley with Blair Levin — then just a humble Wall Street telecom analyst, now the man in charge of the FCC’s forthcoming national broadband plan — turned into a summit of more minds, when Gary Shapiro, president and CEO of the Consumer Electronics Association (CEA), joined our table for scrambled eggs and policy confabbing.

Though the talk then was mostly polite disagreement about how to best get the country’s telecom situation moving forward, it is interesting to now see these across-the-political-aisle types finding common ground around the idea that the government needs to find more spectrum, fast, so that our digital broadband-based marketplace can help lead the nation’s economic recovery.

Here’s a snippet from one of Blair’s recent takes, from a post on the FCC’s national plan blog, where he hilariously compares the current U.S. spectrum assets to the height-challenged former NFL quarterback, Doug Flutie, whose career suffered in part because he had a hard time seeing over the heads of his blockers and rushers:

Spectrum is like height. If you don’t have it, it’s pretty hard to be in the big leagues. As they say, you can’t coach height. Now it’s not an exact analogy. Technology and other capital inputs can help overcome the lack of spectrum. But let’s not kid ourselves. Lack of spectrum will mean that our mobile service will be more expensive and of a poorer quality than if we had more of it. And that’s very bad news unless we figure out a way to solve that problem.

They will never come out and say it publicly — they just don’t roll that way — but when AT&T and Verizon look at their current 700 MHz spectrum assets for their 4G wireless plans (based on Long Term Evolution, or LTE technology), they might be seeing something fairly Flutie-like: Maybe good enough looking in a uniform and helmet, but unsatisfying for a team that wants to win championships. But even as the telco giants deny and bluster about the shape their networks are in, the folks who want to sell devices that use those networks — aka Shapiro’s collective industry group — are so concerned that they are already funding their own studies to find spectrum they think the FCC should repurpose, for wireless broadband use.

From a recent press release/letter to the FCC put out by the CEA, Shapiro said in part:

We are currently facing a crisis in wireless high-speed broadband availability. We encourage the Commission to immediately begin an inventory of spectrum usage. At the same time, it is important to begin developing a model for determining how to identify and reallocate spectrum.

To be sure, this is a political battle that is only just beginning — and at its core are some pretty interesting facets, like the current proposed Senate bill asking for a full and complete inventory of current wireless spectrum (Does it surprise you that our government doesn’t exactly know who is using all our public airwaves, and how? And that a law needs to be passed to force telecom service providers into providing such information?). There’s also the idea of broadcasters joining the fray, as wireless providers and device makers grab for spectrum — oh to be a billable-hours lawyer in the telecom world!

For real people, the worry is that the big telcos — namely AT&T and Verizon — will proceed forward with their nothing’s wrong attitude, giving us all more iPhone network headaches down the line. Until the forthcoming networks actually launch and start serving customers, it’s going to be hard to predict if they will fail a la the iPhone. But if smart folks like Levin and Shapiro are already sounding alarms, maybe it’s time to ask more hard questions beforehand.

Some industry observers, like Boingo CEO Dave Hagan, are already ringing the warning bells, specifically around the big carriers’ plans for LTE being some kind of wireless-data nirvana. And Dave’s got a quote so nice I’m going to use it twice, from my recap of a panel discussion he was on last week at the Open Mobile Summit:

“LTE does not solve the iPhone problem,” said Boingo Wireless Inc. CEO Dave Hagan, speaking on a panel at the conference Wednesday. While LTE might provide throughput four times greater than current 3G implementations, Hagan said the incredible jump in demand generated by devices like the iPhone will trump such low-shooting improvements. “They are chasing a 50x increase [in data consumption] with a 4x solution, a 4x solution that’s going to take four years to complete,” Hagan said. “That’s not going to work.”

As I sat there last week listening to AT&T CTO John Donovan talk about unprecedented leaps in data usage — and linked that thought to Verizon getting its hands on the iPhone as well as the rumored Apple Tablet — I’m reminded that big telco execs have told us before that they have the problem under control. I think this snippet of a conversation between my pal Om and AT&T’s Ralph de la Vega (from June of 2008) should be put on some kind of endless loop, just for fun:

OM: Ralph, as I wrote earlier today, I think the biggest concern is the ability of AT&T to handle the 3G network traffic that would emanate as people start using this new 3G iPhone. What are your thoughts?
RDLV: We have tried to model the usage of the new phone and prepared the network accordingly. We have taken our 2G iPhone usage data and we feel extremely comfortable to be able to deal with the demand. We have a maximum throughput of 3.6 Mbps and soon it will be 20 Mbps. The core of the network is going to run faster as well.

“We feel extremely comfortable to be able to deal with the demand.” How well is that going, iPhone users? And how does it make you feel about the 4G future from the big providers?

Close watchers of the nascent U.S. WiMAX market couldn’t help but notice that for the past couple years there has been a strange sort of tension between the largest WiMAX-only gear vendor, Alvarion, and the largest WiMAX service provider, Clearwire. (Like at the recent 4GWE show, where an Alvarion keynote speech about the general state of WiMAX never mentioned Clearwire’s name.) Was it because Clearwire’s exclusive supplier deals with Motorola and Samsung kept Alvarion out of the game? Whatever the cause, it looks like the relationship is starting to thaw a bit with Tuesday’s announcement of an Alvarion deal to supply a Clearwire network launch — in Spain.

Since the network there will use spectrum in the 3.5 GHz band — unlike Clearwire’s U.S. markets, which use the 2.5 GHz band — there was probably room for Clearwire to negotiate with someone other than its current suppliers, without making anyone angry. No matter what this particular deal is worth, for the WiMAX industry as a whole it’s a great thing to have two of the biggest names in WiMAX from the U.S. market (Alvarion has its headquarters in Tel Aviv, but its U.S. presence is considerable) finally working together. If you remember that Ben Franklin quote about hanging together or hanging separately, with big-carrier competition on the horizon hanging together is going to be a necessity if the U.S. WiMAX market is going to survive and thrive.

Here’s the first in a series of 4G vendor videos… for your viewing interest. This one is from Clearwire, about a DJ who uses Clear’s WiMAX service to mix tunes at local clubs.